Cayman Islands Monetary Authority Statement

Author: | Published: 5 Sep 2017

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The Cayman Islands continues to be one of the world's
top 10 international financial centres. It is the leading
domicile for hedge funds and healthcare captive insurers, as
well as being home to licensed banks from over 40 countries,
including more than 40 of the top 50 banks worldwide. As at
June 2016, total international banking assets and liabilities
were reported as $1.15 trillion and $1.21 trillion,
respectively. These figures comprise cross-border positions in
all currencies and domestic positions in foreign currency.

At the close of 2016, there were 167 licensed banks among
the entities supervised and regulated by the Cayman Islands
Monetary Authority (CIMA). Banks from Europe, South America and
the US represent nearly two-thirds of the banking sector,
followed by Asia, Australia and the Caribbean. As the trend in
increasing global compliance costs continues, international
banks have become increasingly cautious, reducing their risk
profile by withdrawing from certain markets, product lines,
customers and customer segments. This has been most discernible
in the net decrease of European and US bank branches.

To date, the domestic retail banking sector has not
undergone any changes in the composition or services offered.
However, the importance of access to international markets
through correspondent banking relationships continues to be
emphasised. The jurisdiction's money service businesses and
smaller banks continue to endure challenges as a result of
de-risking exercises by US correspondent banks in recent years,
as there are few banks in the jurisdiction that are providing
banking services to this sector. CIMA, in partnership with
other local, regional and international stakeholders, remains
actively engaged in dialogue to identify a long-term
solution.

As prescribed by the Basel II capital accord the
jurisdiction has maintained a minimum capital adequacy ratio
above the 8% threshold, together with the 10% requirement of
the country's Banks and Trust Companies Law (2015 Revision).
Private and affiliate banks are required to maintain no less
than 15% of regulatory capital and banking subsidiaries are
required to maintain 12%.

In 2016 the country's economic outlook remained positive.
Real GDP growth is forecast at 2.5% for the 2016/2017 fiscal
year and the growth of the financial services sector, which
accounts for approximately 40% of GDP, is estimated at 1.8%, in
comparison to 1.7% during 2015.

International credit rating agency, Moody's Investor
Services, affirmed Cayman's sovereign debt rating as Aa3, and
Aa2 for long-term foreign currency ceiling bonds and notes. In
its February 2017 credit opinion, Moody's attributed the rating
and stable outlook to a very high GDP-per-capita, a
comparatively low and falling government debt burden, and a
strong institutional framework with broad consensus on
macroeconomic policies and fiscal oversight by the United
Kingdom. The country's high economic development is forecast to
grow at an average rate of 2.6% over the 2016-2018 period, and
GDP per capita is noted as significantly higher than the median
for Aa-rated countries. The rating agency anticipates continued
budget surpluses, averaging 1.8% of GDP for 2017 and 2018, and
a further decrease in the government's debt burden.

To uphold Cayman's reputation as a global leading financial
services centre, CIMA will continue to assess the
jurisdiction's regulatory framework on an ongoing basis to
ensure successful compliance with international best
practices.